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requires that the income from all dividends shall be included in the returns, but that in computing the normal tax for an individual there shall be excluded the amount received as dividends from stock or net earnings of a corporation which is taxable upon its net earnings. A corporation must pay the tax on income from another corporation. (T. D. 2090, page 20, and T. D. 2137, page 6.) This exemption applies only to the normal tax, which on that income is paid by the corporation. For the additional tax (that on income exceeding $20,000) the individual must pay on income from dividends from a corporation which pays the normal tax. A corporation pays the "normal tax” of 1 per cent on all income, and the shareholders pay the “additional” tax on their respective proportions of the income. As to dividends of aliens from domestic corporations see T. D. 2162. See Statute, sections B and G, and Treasury Regulations, Articles 6, 97, and 107, and T. D. 1945. A withholding agent ((32) does not withhold tax on income accruing to an individual from dividends on stock on which the normal tax has been paid, as in such case the individual is not liable for such tax. (Treasury Regulation 6, subsection 7; and 120.) Aliens regarding dividends, T. D. 2017. See full details, T. D. 2274.

150. Income from Sales of Property. The Statute spe cifically taxes the income from “sales, or dealings in property, whether real or personal. (St. B.) This does not mean that the total amount received by an owner of property in selling it is to be returned as income for that year, but only the profit made on the sale. The same rule applies to all kinds of property, real estate, products, stocks, bonds, and securities. If property is sold which was bought many years previously the profit is to be prorated, and only the portions of such profit that have accrued since March 1, 1913, for individuals, and since January 1, 1909, for corporations, are to be included as income. It is governed by the same rule if the transaction is a part of regular business or merely an individual act. Profits so made by regular real estate dealers or other persons acting as agents for the real owners in the sale of real estate or securities are to be returned by the dealer on his own part of the profit, and by the owner on his share of it. For income tax purposes, where there is an actual transfer of the property, the profit will be counted as of that year, even though the payments are to be made in installments. See Treasury Department Ruling No. 2090, under head of "Profit From Sale of Real Estate," and T. D. 2137, page 8.

151. Income from Farning. Any farmer whose net income exceeds $3,000 from all sources must list the return of his income. These regulations apply to plantations, ranches, stock farms, dairies, fruit and truck farms, and all land used for similar purposes. The return must include every item of income from all sources, sales of stock and products, and any other profits from dealing in farm products. The income is to be calculated for the year in which the products were actually marketed and sold. Rents received in crop-shares shall be included as income for the year in which the crop-shares were reduced to a money equivalent. Deductions and exemptions for expenses, wear and tear, etc., are allowable as explained in paragraphs 21 to 29 inclusive. Machinery cannot be included as expense, as it is an addition to the capital, but the renewal of furnishings and implements and the cost of ordinary working tools are a part of the expense. Money expended for stock for breeding purposes is an addition to capital and not allowable as a deduction for expense; but money expended for stock for temporary trading purposes and intended for resale is an allowable expense. Personal and family expenses are not deductible expenses, but are part of the taxable income. Allowance for "wear and tear” ([26) is deductible for depreciation in value of farm buildings, machinery and stock, but not for the personal dwelling of the owner. A

A person operating a farm for recreation and pleasure and whose expense therefrom exceeds the income need not report the income, and the actual net expense is personal, and therefore not allowable as a deduction. See Treasury Department Ruling No. 2153, and (13.

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152. Husband and Wife, Joint Income. Section C of the Statute contains the “specific exemption” of $3,000 of net income for a single person, or $4,000 if married and living with his wife, or, if a woman, living with her husband. When they are separated and in no way dependent one on the other they are each entitled to all the exemptions, and each must list the income regardless of the other. When living together they both together are entitled to one exemption of $4,000. ([158.) If each has a separate income the income of both may be made on one return with the amount of the income of each and the full name and address of each. The husband is presumed by the law to know of his wife's income and to include the amount of it in his own return unless otherwise stated. If the aggregate net income of both of them together is in excess of $3,000 they are required to make the return, though the tax is assessed only on the excess over $4,000. The single or married status of the person claiming the "specific" exemption shall be as of the time of claiming the exemption if the claim is made during the taxable calendar year, and if the claim is not made during the year then it is taken as of the status on the last day of the calendar year. See Treasury Regulations, Articles 9 and 10. Time and place for returns, 137. The joint return applies only to the normal tax. The additional tax must be based on separate returns. (T. D. 2090, “Husband.”) When living apart only $3,000 is allowed as exemption, T. D. 2135, page 4. Wife's income included as husband's, T. D. 2135, page 4.

153. Forms for Returns. Different kinds of blank forms are required. For an individual or for a fiduciary or other agent who makes the return for an individual, Form 1040, re vised, is used. For a corporation other than an insurance company it is Form 1031. Insurance companies use Form 1030. Fiduciaries or other agents serving in such capacity of trust for a number of persons are required to make the return for each on Form 1040, and another return for all together on Form 1041. (133.) Withholding agents use Form 1042 (132), and partnerships 1065. (136.) Every person

or corporation liable for the tax, whose name is already listed with the Collector of the district, will be supplied with the necessary form; but the responsibility is the taxpayer's, and it is his duty to apply for the form if it is not sent to him. (1140.) In all cases the application for the blank form or the return itself shall be made to the Collector of the district in which is located the taxpayer's principal place of business. (137.) Each return contains four general divisions: all income listed from each specific source; items of deduction claimed under section B of the Statute; amount of specific exemption, if any, claimed under section C of the Statute; and all items of income upon which tax has been withheld at the source. See Treasury Regulations 15, 16 and 17, and forms in last part of this book. Forms for withholding, T. D. 1973 and 1976; foreign agents, T. D. 1977; banks withholding, T. D. 1986 and T. D. 2258; nonresident aliens, T. D. 1988.

154. Protests of Taxpayer. All allowances for deductions and exemptions must be asked for by the taxpayer, and in case of a person whose return is made by a withholding agent or another, such person must file either with the Collector or the agent a written demand for the exemptions thirty days before the return is due to be made. (T. R. 41, 42, 60.) If such demand should not be made in due time, or in case of any taxes which were paid and not legally due, the recourse is an appeal to the Commissioner of Internal Revenue, in accordance with section 3220 of the Revised Statutes. A protest against assessment can be made before collection of the tax in the same way. The Commissioner of Internal Revenue is authorized to refund "all taxes errone ously or illegally assessed or collected, all penalties collected without authority, and all taxes that appear to be unjustly assessed or excessive in amount or in any manner wrongfully collected,” and to pay to any collector or deputy the amount recovered against him in any suit brought against him for anything done in performance of his official duty. The Commissioner apparently has full discretion, except that with regard to penalties incurred he cannot remit them if they were assessed and collected according to the law. (Revised Statutes, section 3220, and T. D. herein 2015.) Section 3224 of the Revised Statutes of the United States prescribes that “no suit for the purpose of restraining the assessment or collection of any tax shall be maintained in any court.” This means, of course, that an injunction against a Collector of Internal Revenue is not possible. Tax illegally withheld is to be returned. T. D. 2131. The procedure for any wrong done to the taxpayer is by appealing first to the Commissioner, and after that, but not before, suit can be brought in the Federal court for the recovery of the alleged illegal tax that was collected. (R. S. 3226.) Both the appeal to the Commissioner and the suit are limited to two years from the date the cause of action accrued. (R. S. 3226 and 3227.) The legal limit for collecting tax is three years after the return was due to be made. (St. E.) Penalties, [40. Assessment, 144.

155. License for Foreign Collections. This provision applies to the collection of coupons, checks, bills of exchange, etc., representing interest due by bonds, mortgages and other obligations issued in foreign countries, and the real source of payment of which is in a foreign country. It applies to any "handling” of the coupons, etc., for profit, by way of

purchase, sale or collection or otherwise. All persons, firms or corporations undertaking the collection of such income for profit are required by law to obtain a license from the Commissioner of Internal Revenue. Application for the license will be made to the Collector for the district in which the applicant has his place of business. The Collector will issue the license without charge, and it will continue in force until revoked or canceled. If the Collector is not satisfied as to the entire responsibility of the applicant, he may require a bond with sureties equal to the estimated amount of tax due to be withheld by the applicant during one year. The person so licensed will make regular reports to the Collector of all items collected by him in such business. Failure to obtain

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